Analysis of School District

Fiscal Response

1993-94 to 1998-99

Regents Discussion Item

The State Aid Work Group

November 2000

Analysis of School District Fiscal Response

1993-94 to 1998-99

Executive Summary

The question of whether school districts respond to increases in State Aid by maintaining local tax effort or lowering tax rates has been a traditional concern of public finance experts. In light of the Regents emphasis upon targeting State Aid to high need school districts and ensuring adequate resources are available to enable all students to achieve high academic standards, the issue of fiscal response has remained an area of concern to New York State policymakers as well. As the State focuses additional resources on high need schools, any diminution of local tax effort, particularly if local tax effort is "inadequate" to begin with, poses a significant policy concern. For this reason, particular attention was paid to understanding patterns of fiscal response in districts of varying need/resource capacity.

This paper presents findings of an initial exploratory analysis. It is focused on two major areas of concern. First, it examines the extent to which changes in State Aid are reflected in district expenditure. In other words, if districts are using their State Aid to fund educational programs while maintaining local effort, increases in State Aid should be accompanied by increases in expenditure on a per pupil basis. This paper describes the strength of this association and those variables that have been found to be associated with changes in per pupil expenditure. Secondly, the strength of the relationship between changes in State Aid and changes in local effort was examined, and specific categories of district fiscal response have been identified.


District spending and State Aid patterns were examined for the period 1993-94 to 1998-99. In order to examine spending changes adjusted for inflation over this period, the 1998-99 expenditure, State Aid and local levy data were converted to 1993-94 constant dollars. Results are presented in 1993-94 constant dollars unless otherwise noted.

Throughout the study, the State Aid measure used was total State Aid on the database minus Building Aid, Transportation Aid and Reorganization Incentive Building Aid. The expenditure measure used was total expense minus transportation, debt service, and district intra-fund transfers. The expenditure and revenue categories that were excluded are associated with capital-intensive activities. Since these activities typically include periodic one-time investments in assets like buildings or school buses – assets that will be used over an extended period of time - they distort both accurate year-to-year comparisons as well as inter-district or inter-group comparisons.

Findings - State Aid and Total Expenditure

As a first step, the relationship between changes in State Aid per pupil and changes in expenditure per pupil was examined. This portion of the analysis was designed to determine the extent to which State Aid increases could be detected in increases in expenditure per pupil. Major findings are:

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Findings - State Aid and Local Effort

A conceptual framework was developed to examine both State Aid changes and local effort changes from 1993-94 to 1998-99. That framework is displayed in Figure 1. Districts were first classified regarding changes in State Aid, i.e., they either received increases or decreases in State Aid per pupil over the time period examined (after eliminating inflationary changes). With respect to changes in local effort, districts were classified in one of three ways. If a district experienced both a decrease in local tax rate and a decrease in cost-adjusted levy per pupil, the district would be considered to have decreased local effort. A district with both an increase in local tax rate and an increase in local levy per pupil was considered to have increased local effort. In some districts the change in local effort was mixed. If a district had an increase in local tax rate accompanied by a decrease in local levy per pupil (or a decrease in tax rate accompanied by an increase in levy per pupil), the district was classified as a mixed effort district.

The framework described allows us to clearly identify negative fiscal response districts as those that experienced an increase in State Aid per pupil and a decrease in local effort from 1993-94 to 1998-99 (bottom right corner of figure 1 above). Additionally, positive fiscal response districts were identified as districts that experienced increases in State Aid and increases in local effort. Districts that compensated for State Aid funding decreases by increasing local effort were labeled as positive compensating districts. In other words they raised local effort to account for decreases in State Aid (top left corner of Figure 1).

Additionally, districts that experienced decreases in State Aid and decreases in local effort were considered to be negative compensating districts (bottom left of Figure1). Districts for which the direction of the local effort change was mixed were considered to be mixed response districts. Figure 1 also displays the number of districts identified in each category.



Fiscal Response and the Big Five


New York City





Response Type

Mixed Response

Positive Fiscal Response

Mixed Response

Negative Fiscal Response

Negative Fiscal Response

1993-94 Tax Rate






1998-99 Tax Rate






1993-94 Levy Per Pupil






1998-99 Levy Per Pupil (CPI-Adj)






1993-94 State Aid Per Pupil






1998-99 State Aid Per Pupil (CPI-Adj)






Dollar Change in Expenditure Per Pupil (CPI-Adj)






The technical supplement provides a detailed description of the methodology and findings of this study of the fiscal response of school districts.


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